Low demand was one of the reasons why Spotify decided to stop manufacturing the dashboard accessory.

Music streaming giant Spotify has decided to exit its foray into hardware by permanently shutting down the production of the dashboard accessory called the Car Thing. The decision came on Wednesday, just as the Swedish company announced its Q2 earnings report, which exceeded analysts' estimates.

TechCrunch reported that Spotify's monthly active users grew by 19%, equivalent to 19 million, bringing its total to 433 million, which is five million more than estimates. Paid users were also up by 14% with 188 million, a result that came as a surprise to the company that expected less than stellar results due to its exit from Russia.

However, Spotify did miss its gross margins, which they believed was "negatively impacted by our decision to stop manufacturing Car Thing." The Swedish streaming giant is losing $31.4 million on that business line as it shuts down.

The Short History of Spotify's Car Thing

It was in 2019 when Spotify introduced the concept of the Car Thing, but it was not until this year when the product actually reached the broader public. At first, the Car Thing was introduced by invite-only purchases to select Spotify users, Engadget reported.

The Car Thing served as a Spotify player for vehicles that did not have streaming functionality. But the low demand for the dashboard accessory did not come as a surprise to many, especially when many cars can already access Spotify through Android Auto, Apple CarPlay or other built-in apps. Car Thing then became a dashboard accessory for those who wanted to stream music but did not want to mount their phone.

A Spotify spokesperson confirmed, however,that the Car Thing will continue to "perform as intended." The company admitted that their foray into hardware had "unlocked helpful learnings" and that they still consider cars and vehicles as "an important place for audio."

Read Also: Spotify Tests Podcast Creation Tool on its App - How Does it Work?

Spotify Reports Q2 Revenue Exceeding Analysts' Estimates

Unlike other tech companies in the US that are seeing a major slump this second quarter, Spotify reported second quarter revenue that exceeded analysts' estimates. Aside from the 14% increase in paying customers, the company's shares also rose 5% in premarket trading, Reuters reported. Ad-supported income also rose 31% this second quarter.

In an interview, Spotify's Chief Financial Officer Paul Vogel admitted that the company saw "a little bit of softness" during the final two weeks of the quarter, but added that they expect advertising to "become a much bigger part" of the business "over the long term. Right now, advertising only makes up 13% of the company's revenue.

Spotify saw a 23% increase in revenue with $2.94 billion versus expectations of $2.86 billion. The company is treading carefully however, as it slowed down its aggressive hiring. In its third quarter, headcount growth slowed down by 25% as Spotify observed marketing activity.

Spotify continues to sell the remaining Car Things for a discounted rate of $49.99 from its original price tag of $89.99.

Related Article: Spotify Growth Skyrockets to 422 Million Users Despite Exit in Russia and Joe Rogan Controversies